No, Obamacare Has Not Fixed Healthcare Inflation

March 11, 2015

Matt Phillips recently proclaimed Obamacare fixed the United States healthcare inflation problem. However, giving Obamacare credit for the recent lull in health prices is quite a stretch for two reasons. First, it fails to account for the fact that this downward trend was clearly visible years prior to Obama taking office as president. Second, it fails to account for what was happening to the general economy and general inflation during the same time.

In addition, Mr. Philips focused on the price index for health services instead of the index for all health, which means his measure misses 20 percent of national health spending. Using the index for all of health and taking those two facts above into consideration, we find that:

Examining the pattern of general inflation shows the same results as healthcare inflation. General inflation drives medical inflation. Additionally, there is a recent uptick. It is unknown whether this is a temporary spike or the start of a more enduring upward trend, but it is certain that idea of the U.S. healthcare inflation being "fixed" is far from clear.

Subtracting general inflation from medical inflation shows a more realistic picture of Obamacare's impact on medical inflation. It shows a general downward trend in gradually diminishing "excess" medical inflation that began well before President Obama\'s arrival in the Oval Office.